THIS
MATTER comes before the Court on defendants Gary King, Amy
Landau, Elizabeth Staley, Mark Workman, Cathy Stevenson,
Orlando Sanchez, and Walter Rodas's (collectively
“State Defendants”) Motion to Dismiss (Doc. 20),
filed July 12, 2017. Plaintiffs filed their Response to
Defendants' Motion to Dismiss (Doc. 25) on August 7,
2017. State Defendants filed their Reply in Support of Motion
to Dismiss (Doc. 26) on August 22, 2017. Having read the
submissions of the parties and being fully advised, and for
the following reasons, the Court GRANTS the State
Defendants' Motion to Dismiss in part, and DENIES it in
part.

I.
Relevant Facts

In
ruling on a motion to dismiss under Rule 12(b)(6), the Court
must accept as true all facts alleged in the complaint.
See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007). It also must view these factual allegations in the
light most favorable to the plaintiff. See Id.
Viewing the facts alleged in the complaint in this manner,
the complaint establishes the following:

In
September 2009, the State of New Mexico, through the New
Mexico Attorney General's Office, brought a lawsuit
against Advantageous Community Services, LLC
(“Advantageous”). Doc. 1-1 ¶ 22. The case
was captioned State of New Mexico ex rel. Gary K. King,
Attorney General v. Advantageous Community Services,
LLC, D-202-CV-2009-11396. Doc. 1-1 ¶ 22. At the
time, Gary King was the New Mexico Attorney General, and Amy
Landau was an attorney in his office. Id.
¶¶ 6, 7. Elizabeth Staley also was an attorney at
the Attorney General's Office, and was Director of the
Medicaid Fraud and Elder Abuse Division there. Id.
¶ 8. Marc Workman was an investigator for the Attorney
General's Office. Id. ¶ 9. Cathy Stevenson
was the Director of the Developmental Disabilities Support
Division for the New Mexico Department of Health.
Id. ¶ 10. Orlando Sanchez and Walter Rodas both
were employees of the New Mexico Department of Health.
Id. ¶¶ 11, 12.

Advantageous
is a New Mexico business that provided home-based care to
Medicaid recipients pursuant to the Developmental
Disabilities Waiver Program. Id. ¶ 16. Dr.
Arminder Kaur is the owner of Advantageous. Id.
¶ 2. Haraspal and Harchi Singh are Dr. Kaur's sons
and were employed by Advantageous. Id. ¶¶
3, 4.

The
State's lawsuit against Advantageous alleged that between
2004 and 2007, six Advantageous caregivers billed and were
paid for services while the caregivers lacked appropriate
criminal history screening, which allegedly violated federal
Medicaid statutes. Id. ¶ 23. None of the
caregivers, however, had any disqualifying criminal
convictions, which the State readily could have discovered
with adequate investigation. Id. ¶ 24.
Plaintiffs allege that the State and the defendants involved
in the prosecution of the State's lawsuit did not have a
factual or legal basis to pursue the State's claims
against Advantageous under the New Mexico Medicaid Fraud Act.
Id. ¶ 35.

The
State, through Attorney General King, attorneys Landau and
Staley, and investigator Workman (collectively referred to as
the “AG Defendants”), brought suit against
Advantageous and other similar providers in an effort to
force the providers to make payments to the State regardless
of the merits of the State's claims. Id. ¶
25. The AG Defendants engaged in this practice over a period
of time in a “Shake-down” program designed to
collect nuisance settlements that providers like Advantageous
would pay to avoid the costs of defending the State's
lawsuits or to avoid other negative consequences stemming
from such suits. Id. The AG Defendants, in preparing
the State's case against Advantageous, used discovery and
other evidence gathering procedures to enable the State to
pursue criminal charges against Advantageous under the New
Mexico Fraud Act or other criminal statutes if it so chose.
Id. ¶ 26. The State's claims and
allegations against Advantageous involved Dr. Kaur and his
sons' work at Advantageous, and those claims and
allegations disrupted Advantageous's business activities,
impacted its ability to secure alternative business, and
impacted Dr. Kaur and his sons' ability to obtain
alternative employment. Id. ¶ 27

During
the course of the State's lawsuit against Advantageous,
plaintiffs discovered that the State Defendants had
fabricated evidence to support the State's case against
Advantageous. Id. ¶ 28. Advantageous brought
this conduct to the attention of the court in the state case.
Id. In retaliation, the AG Defendants, in
conjunction with Director Stevenson, in 2011 withheld
substantial funds that were owed to Advantageous for Medicaid
services it provided during the term of its state contract.
Id. ¶ 31. The AG Defendants and Director
Stevenson effectuated improper recoupments to the State
before proving any claims against Advantageous. Id.
Even before 2011, the AG Defendants and Director Stevenson
for years applied unwarranted withholdings from funds owed to
Advantageous before proving any claims against Advantageous.
Id. ¶ 32. In connection with the State's
lawsuit against Advantageous, the AG Defendants and Director
Stevenson imposed an improper moratorium on business with
Advantageous, again before proving any claims against
Advantageous. Id. According to plaintiffs, this
conduct constituted extra-judicial forfeiture proceedings
against Advantageous without any court involvement at any
stage. Id. ¶ 33.

Meanwhile,
the New Mexico Department of Health, through Director
Stevenson, terminated and refused to renew Advantageous's
Medicaid contract. Id. ¶ 29. During a
deposition in May, 2011, Attorney Landau stated on the record
that the New Mexico Attorney General's Office consulted
with the New Mexico Department of Health on the
Department's decision to terminate Advantageous's
Medicaid contract. Id. ¶ 30. Plaintiffs believe
that Attorney General King and attorney Staley also were
involved in this decision, which was part of the improper
conduct intended to damage Advantageous. Id. ¶
29. Plaintiffs allege that the termination and refusal to
renew Advantageous's Medicaid contract was done in
violation of Advantageous's substantive Due Process
rights, in particular because the decision was arbitrary,
irrational, and/or shocking to the contemporary conscience.
Id. ¶ 34.

The
judge presiding over the state court proceeding granted
summary judgment in favor of Advantageous based on the lack
of evidence to support the State's claims as well as the
State's fabrication of evidence submitted in connection
with that proceeding. Id. ¶ 36. Because the
State failed to keep adequate records, it could not present
competent evidence to support any of its claims against
Advantageous. Id. ¶ 37. The State also had no
legal basis to pursue its claims against Advantageous under
the Medicaid Fraud Act or any other law. Id. The
regulations that the State accused Advantageous of violating
were not an appropriate basis for the State's claims
against Advantageous because compliance with the regulations
was not a condition of payment for moneys owed to
Advantageous. Id. Further, there were never grounds
to pursue claims against Advantageous for violations of the
criminal-history screening requirements under the Medicaid
Fraud Act because that Act does not provide for such a claim.
Id. ¶ 44.

The
judge also ruled that the State engaged in egregious
misconduct by fabricating evidence. Id. ¶ 38.
The judge found that Attorney Landau used a letter in the
litigation that had been fabricated by Investigator Workman
and Department of Health employees Sanchez and Rodas.
Id. Specifically, Investigator Workman was unable to
find clearance letters for two of Advantageous's
caregivers in the State's own records. Id.
Investigator Workman contacted Rodas at the Department of
Health to see if the Department of Health had copies of the
letters. See Id. Department of Health employees
informed Investigator Workman that the Department did not
keep copies of the requested clearance letters, and informed
Workman of the inaccuracies that would be contained in
re-created letters. See Id. Department of Health
employees Sanchez and Rodas re-created the letters even
though they knew the letters would contain inaccurate
information. See Id. Investigator Workman received
the re-created letters and provided them to attorney Landau
knowing that they were false and inaccurate. See Id.
Investigator Workman knew that the fabricated letters were to
be used in connection with the litigation against
Advantageous. See id.

The
state judge entered summary judgment against the State with
prejudice. Id. ¶ 40. The State appealed the
judge's ruling. Id. The New Mexico Court of
Appeals affirmed the state district court's ruling on
June 9, 2014, [1] based on the State's use of fabricated
evidence. Id. ¶ 42.

Advantageous
administratively appealed the State's decision to
terminate and refusal to renew its Medicaid contract.
Id. ¶ 43. Those proceedings terminated on July
2, 2014. Id. Advantageous asserts that it has
exhausted its administrative remedies. Id. ¶
45.

II.
The Complaint

Count I
of the complaint, brought under 42 U.S.C. § 1983,
alleges that the State Defendants violated the
plaintiffs' Fourth and Fourteenth Amendment rights by
maliciously prosecuting Advantageous and misusing judicial
proceedings. Id. ¶¶ 47-58. This claim is
based on the State Defendants' fabrication of evidence
and the plaintiffs' allegation that the State Defendants
lacked probable cause to initiate proceedings against
Advantageous. See Id. Count I further alleges that
the State Defendants used extra-judicial forfeiture
proceedings against Advantageous to withhold and recoup funds
owed to Advantageous for Medicaid services it had provided.
Id. ¶ 59.

Count
II of the complaint, also brought under 42 U.S.C. §
1983, alleges that the State Defendants violated the
plaintiffs' rights under the Fourth and Fourteenth
Amendments by fabricating evidence against the plaintiffs.
Id. ¶¶ 62-65. Count III of the complaint,
also brought under 42 U.S.C. § 1983, alleges that the
State Defendants violated the plaintiffs' Due Process
rights under the Fourteenth Amendment by terminating and
refusing to renew Advantageous's Medicaid contract in an
arbitrary and capricious manner, and in a manner that shocks
the conscience. Id. ¶¶ 67-71.

III.
Discussion

The
State Defendants argue in their motion to dismiss that the
individual plaintiffs' claims should be dismissed because
they lack standing to sue. Doc. 20 at 5-6. The State
Defendants also argue that plaintiffs lack a protected
property interest necessary to state a constitutional claim
under 42 U.S.C. § 1983. Id. at 6-7. The State
Defendants further argue that they are absolutely immune from
suit, but if not absolutely immune, they are entitled to
qualified immunity. Id. at 7-11. And lastly, the
State Defendants claim that the plaintiffs' claims are
barred by the statute of limitations. Id. at 11-12.

Plaintiffs
respond that they have standing to sue because they suffered
damages as a result of the State Defendants' misconduct.
Doc. 25 at 2-4. They also argue that they have protected
property and liberty interests sufficient to state a
constitutional claim under 42 U.S.C. § 1983, and that
they have adequately alleged violations of their Fourth
Amendment rights as well as violations of their procedural
and substantive Due Process rights. Id. at 4-15.
They further contend that no defendant is entitled to either
absolute or qualified immunity. Id. at 15-21. And
finally, they argue that their claims are timely.
Id. at 22-24. The Court will address the
parties' arguments with respect to each count of the
complaint as necessary.

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